Asian stocks drop as instability fears mount

Asian stocks fell this week amid concern instability in the Middle East and North Africa could derail a global economic rebound, reversing gains last week on signs the recovery was strengthening.

Hyundai Engineering & Construction Co, which gets 38 percent of sales from the Middle East, sank 6.2 percent in Seoul. Qantas Airways Ltd, Australia’s largest airline, slumped 6.3 percent in Sydney and Air China Ltd tumbled 14 percent in Hong Kong as unrest in Libya drove fuel prices above US$100 a barrel for the first time in two years. Toyota Motor Corp, the world’s largest automaker, fell 3.4 percent in Tokyo.

“Share prices will have a tough time rebounding as long as investors have their eyes on the risks stemming from the uncertainty in the Middle East,” said Kenji Sekiguchi, general manager at Mitsubishi UFJ Asset Management Co, which oversees about US$75 billion.

The MSCI Asia-Pacific Index dropped 2.1 percent to 136.86 this week as Middle East rulers attempted to contain uprisings that have overthrown leaders in Tunisia and Egypt, and spread to Bahrain, Yemen and Libya. That rolled back the previous week’s 3 percent gain after US and Japanese central banks raised their growth outlooks and companies posted better-than--estimated earnings.

Declines in Friday trading were concentrated in the traditional sectors led by a 3.85 percent decline in construction shares, after the government said it was considering a new luxury tax that would include a special tax levied on speculative property transactions.

A total of 2,192 stocks closed up, 2,215 finished down and 388 remained unchanged.

“There’s uncertainty about what’s going on in the Middle East,” said Yasushi Noguchi, a strategist in Tokyo at SMBC Friend Securities Co. “Investors will increasingly be taking a wait-and-see stance.”

“We’re having a natural reaction to the unrest with oil going above US$100,” Todd Martin, Societe Generale’s Asia equity strategist, said in a Bloomberg Television interview in Hong Kong this week.